Distinguish between Explicit Cost and Implicit Cost? – InterviewSolution

1.

Distinguish between Explicit Cost and Implicit Cost?

Answer»

Explicit Cost	Implicit Cost
1. Payment made to others for the purchase of factors of production is known as Explicit Costs.	Payment made to the use of resources that the firm already owns, is known as Implicit Cost.
2. It refers to the actual expenditures of the firm to purchase or hire the inputs the firm needs.	Implicit Cost refers to the imputed cost of a firm’s selfowned and selfemployed resources.
3. Explicit cost includes wages, payment for raw material, rent for the building, interest for capital invested, expenditure on transport and advertisement, other expenses like licence fee, depreciation and insurance charges	A firm or producer may use his own land, building, machinery, car and other factors in the process of production.

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